February 28, 2012
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A senior OECD official claims that the risk weights of Basel III should be scrapped:
a more fundamental rethink of the Basel framework for determining minimum capital requirements for banks is needed. Basel III is just a quick and dirty repair job, consisting of patches applied to fix things that went visibly wrong during the past four years. But it involves no reconsideration of the structure of a fundamentally flawed system that is opaque and far too complex. The risk weight system at the core of the approach for calculating capital charges needs to be scrapped in its entirety and a more coherent approach to exposures arising from derivatives, notionally in excess of $600 trillion at the end of 2010, must be found.
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